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The Defense Department and prime contractor Lockheed Martin have reached an agreement on a $34 billion contract for low-rate initial production Lots 12 through 14 for the F-35 joint strike fighter, the Pentagon’s top weapons buyer announced Oct. 29.

The $34 billion deal announced by Undersecretary of Defense for Acquisition and Sustainment Ellen Lord is for the delivery of 478 F-35s including 149 for Lot 12, 160 for Lot 13 and 169 for Lot 14.

“This is a new … milestone for the F-35 enterprise,” Lord said during a briefing with reporters at the Pentagon. “The F 35 is our largest [tactical aircraft] investment and will form the backbone of the U.S. and allied fifth-generation inventory for the foreseeable future.”

Lord added that her office and the F-35 joint program office are “laser focused on driving cost out, quality up and achieving timely deliveries of our capability to our warfighters.”

The aircraft is an advanced fifth-generation fighter and is expected to be the centerpiece of the U.S. military’s fleet in the coming decades. The platform, a multinational project, is also being sold to allied nations and foreign military sales customers.

Among the 478 aircraft that are part of the new deal, 291 are for the U.S. military services, 127 are for F-35 international partners and 60 are for FMS customers. A total of 351 will be the F-35A conventional take-off and landing variant, 86 will be the F-35B short take-off and vertical landing variant, and 41 will be the F-35C aircraft carrier-launched variant, according to the Defense Department and Lockheed.

Under the terms of the agreement, the per unit recurring flyaway cost of the F-35A will reach the Pentagon’s target of less than $80 million by Lot 13, one lot sooner than planned. It will be $82.4 million for Lot 12, $79.2 million for Lot 13, and $77.9 million for Lot 14, according to Lockheed. For Lots 12, 13 and 14 the F-35B will cost $108 million, $104.8 million and $101.3 million, respectively. And the F-35 C will cost $103.1 million, $98.1 million and $94.4 million respectively.

Relative to Lot 11, the Lot 14 unit cost will represent an estimated reduction of 12.8 percent for the F-35A, 12.3 percent for the F-35B and 13.2 percent for the F-35C. Average savings across all three variants from Lot 11 to Lot 14 will average 12.7 percent, according to the Pentagon.

Lockheed also touted the drop in procurement costs, which had previously been a point of criticism from President Donald Trump and other observers.

“With smart acquisition strategies, strong government-industry partnership and a relentless focus on quality and cost reduction, the F-35 enterprise has successfully reduced procurement costs of the fifth- generation F-35 to equal or less than fourth-generation legacy aircraft,” Greg Ulmer, F-35 program vice president and general manager at Lockheed, said in a statement.

Program Executive Officer Air Force Lt. Gen. Eric Fick noted that the program has now moved beyond the most dramatic rate increases in the production line that characterized previous LRIP lots. The 149 aircraft in Lot 12 represent only a 6 percent increase over Lot 11 quantities. Lots 13 and 14 will have similar increases, he added. In comparison, quantities for Lot 11 quantity were 50 percent higher than Lot 10, and Lot 10 was 65 percent greater than Lot 9.

The large increase in the production rates proved challenging for the supply chain, he said.

“But the comparatively minor quantity changes across Lots 12 through 14 should give it some breathing room. As we move forward, this stabilization will help with the timely delivery of parts to the production line and spares and repairs to the field,” Fick said.

While production costs are coming down, Lord said more work needs to be done to reduce sustainment costs and improve aircraft readiness rates. The department is in talks with Lockheed about a performance-based logistics contract.

“You will see a renewed focus on sustainment over the next 12 months out of my office working with the [joint program office],” she said. “We are taking a very data-driven approach towards a potential PBL with Lockheed Martin. So we are working hard at understanding where the operational availability, the mission capability, and where the cost-per-flight hour are being driven and making sure we come up with a win-win situation for both the warfighter as well as the taxpayer.”

Meanwhile, the Milestone C full-rate production decision for the joint strike fighter, which was expected by the end of this year, has been delayed due to challenges in integrating the aircraft into the joint simulation environment, which is a key part of the initial operational test and evaluation for the program.

The joint simulation environment, or JSE, is a synthetic training initiative to help defense officials determine how the planes would perform against advanced adversaries.

“Ultimately, what we're doing is we're taking a digital representation of the aircraft and we're integrating it into a synthetic representation of the threat space to include ground threats, air threats, both blue and red weapons, environmental effects — all of those things. And we're integrating them together so that the systems talk to one another, and that's just a very, very large task to get done,” Fick said.

The highly anticipated Milestone C full-rate production decision will be delayed until the joint simulation environment is available to support the director of operational test and evaluation's assessment of the program.

“The criteria in terms of getting out of IOT&E is to test against threats that we will see 10 years from now in the densities we would see 10 years from now. We can only do that in a synthetic environment,” Lord explained.

Fick noted that integrating the aircraft into the joint simulation environment will also be important to future modernization efforts on the joint strike fighter.

“We look forward to this thorough assessment and are working hard with the Naval Air Systems Command and Lockheed Martin to fully integrate the F-35 into this complex synthetic environment,” he said.

Meanwhile, Lord said the Pentagon has full confidence in the operational capabilities of the F-35s that are flying today.

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